Geberit – Interesting times! - When boring gets exciting!


“I never look behind, all the time
I will wait forever, always looking straight
Thinking, counting, all the hours you wait
See you on a dark night (ooh, ah)
See you on a dark night (ooh, ah) (la, la, la, la, la)

Oblivion – Song & lyrics by Grimes

From 2008, you’ll certainly remember the Lehman Brothers bankruptcy and the Madoff scandal, but do you remember that President George W. Bush dodged a pair of shoes at a press conference in Irak. Herewith a quick reminder.

So here we are today, amid the COVID-19 crisis and Iran has issued an arrest warrant and asked Interpol for help in detaining US President Donald Trump and dozens of others that supposedly carried out the drone strike that killed a top Iranian general in Baghdad. On the corporate & music front, Grimes, the partner of Mr. Tesla, Elon Musk, and mother of their child, named their son (his 5th child)  X Æ A-12 (pronounced Ex Ash A Twelve). They had to change the name to X Æ A-XII, as their first choice violated the naming laws in California – apparently you can’t have a figure in your first name in California. 
Incidentally, the Grimes song quoted above was produced in 2012 during an intensive recording session that included a period of nine days without sleep, food, or companionship, with Boucher (Grimes’ real name) blacking out her windows (early lockdown!), since she generally could not make music as readily during the day, and “doing tons of amphetamines”. She described the writing process as being "equally enjoyable and tortuous", feeling that its difficulty contributed to its success.
In the meantime Tesla stock is up 350% YTD.  
At the other end of the spectrum and on the other side of the pond, in conservative Germany, a “smaller” scandal emerged with the Wirecard bankruptcy.  Tell me! where are the $ 2bn?

We certainly live in interesting times, but sometimes I wish, like a wise oriental man once said, to be spared of that fate, and that I could live in uninteresting times. Well, enough talk, let’s walk, I told myself. Amid COVID-19, why not walk through Switzerland. And that’s what I did and after 2 weeks, I arrived at the village of St Gallenkappel, where the most innovative toilet manufacturer originated.

Once upon a time, some 146 years ago, Caspar Melchior Albert Gebert (1850-1909) of St. Gallenkappel, Switzerland, opened his first plumbing business on the Engelplatz Square in the old town quarter of Rapperswil. His sons make the company prosper and in 1929 Albert Emil Gebert opens the company’s first foreign office, a retail depot in Paris.  The 1930’s present a ground-breaking development for the future of the company, when work begins in the area of plastic processing, a very new technique used to produce corrosion-resistant cistern components and pipes. 

Let's fast-forward 60 years to the beginning of the 90's when the members of the founding family retire from operational management.  In 1991, under the leadership of the new CEO, Günter F. Kelm, a new management structure is developed and introduced.  In 1999 I met Guenter Kelm when the company went public.  I got the sense that Geberit was a great biz and that CEO Kelm was a very good manager & a strong character, in other words a tough act to follow.  When Albert Baehny joined the company and was subsequently designated CEO of Geberit 15 years ago, I met him several times to convince myself that Geberit’s future is assured.  

After an incredible decade at the helm of Geberit, Albert became Chairman of the Board & Christian Buhl, the current CEO, took over. The Geberit team have delivered beyond (my) wildest expectations. They have preserved a high level of operating margin for the group (above 25%) by generating growth organically, by stimulating innovation (Acqua Clean initiative, shower toilets) & by enhancing strategic thinking from "behind the wall" to “in front of the wall” of the company.  Over the last 15 years, Geberit saw its return on invested capital (ROIC) improve even further from an already high level! 

And this week, the early bird delivered fresh news in releasing its H1/2020 sales figures. Unsurprisingly, Q2/2020 sales vs. Q2/2019 were all in negative territory, but for H1/2020 vs. H1/2019, the evolution was surprisingly good in Germany (+2.9% the largest market), Nordic Countries (+2.2%), Eastern Europe (+1.4%) and Switzerland (+0.5%), and expectedly bad in the UK (-34.1%), Italy (-25.1%), Iberia (-20.9%) and France (-19.2%).

Geberit market cap at IPO 20 years ago was $1.4 bn. Today it’s worth $18 bn and it trades at 32x 2020 earnings, not cheap for a construction stock!
No $ 2 bn missing here!
But! Tesla is trading at 340x earnings 2020 and is worth $260 bn.
Interesting times, indeed!